Low-interest Mortgage Worth The Wait

July 15, 1985|By David Gibson, Staff Writer

Home ownership, the American dream, has edged close to reality for 330 people.

The people -- including some who waited in line as long as 50 hours -- began applying for 9.65 percent mortgages Wednesday, available because of a $20 million bond issue sponsored by the county`s Housing Finance Authority.

The authority was established in 1979 to create home ownership opportunities for people in the low- to moderate-income brackets.

It will take about a month for the nine finanicial institutions participating in the HFA program this year to determine how many applicants will qualify for the low-interest loans. Most applicants will qualify because they were well- versed in the requirements for the program before staking out a place in line.

Those who don`t qualify, however, will be quickly replaced by people on waiting lists who didn`t make it into line in time.

Including the people who will receive the loans in this year`s program, 3,000 people have joined the ranks of homeowners since the first HFA bonds were issued in 1980.

Observers and participants in the program say that number satisfies only a fraction of the need, yet every little bit helps.

``If $20 million is gone in one day, it shows it`s just putting a dent in the need,`` HFA Director Earl Mixon said.

The amount of bond money the county authority has available depends on a state allocation based on population and other factors.

With last year`s $20 million bond issue, institutions were able to make 302 loans, accounting for 1.1 percent of the 25,955 single-family homes and condominiums sold in the county in 1984, according to Chief Deputy County Property Appraiser Chet Meeth.

That dent could become even smaller in 1986 if federal tax reforms eliminate the tax-free status that makes the bonds attractive to investors. Because investors are not taxed on the interest they earn on the bonds, the bonds can be sold at a lower rate of return, with the savings passed on to the homebuyers who qualify for the mortgages.

``In the short run, it is costing the government money (because the investment returns are not taxable). But in the long run, it`s adding housing and jobs,`` HFA Chairman Lloyd Hasner said.

Under the terms of the single-family mortgage program this year, the low- interest loans are available to county residents with an annual household income of less than $39,450. First-time homebuyers may use the loans to purchase new or existing single-family homes, but the home cannot cost more than $86,000, Mixon said.

Mixon said the tax-free bonds generally allow the mortgages to be made available at about 2 percent less than commercial mortgage rates.

The 1985 bond issue made $17.9 million available for mortgages, with the remainder being used for administrative costs of the issue and a reserve for bad loans.

The 9.65 interest rate, with commercial rates running about 12.25 percent, could result in a monthly savings of about $2 per $1,000 of loan value, said Skip Humphries, vice president for loan production at Florida Housing Finance Corp., one of this year`s nine participating institutions.

Humphries said commercial loans cost about $10 a month per $1,000 of loan value. For the buyer of a house mortgaged for $50,000, the difference would be monthly payments of $500 at the commercial rate or $400 at the low-interest rate.

In some cases, the low rate allows people to get more house for their money.

Ed and Lisa Armstrong of West Palm Beach estimate the difference is worth $10,000 to them.

As they were holding 11th place in one of the lines the evening of July 8, 37 hours before applications would be taken, Ed Armstrong said, ``We were looking for a home in the low to mid-50s, but when we found out about the bond money, we started looking in the 60s. We were definitely going to buy a house, This allows us to buy more.``

Humphries, whose company has participated in the program for three of its five years, said the new homeowner is probably the biggest winner but nobody loses.

``Nobody makes a lot of money, but everybody wins,`` Humphries said. ``The bond holders win because they get investments at reasonable rates. The Housing Finance Authority wins because they provide housing. The lenders win because they provide a service and generate some income. And the consumer certainly wins.``

The lenders may win less than the others involved.

Because of the low rate and additional paperwork, the lenders have a smaller profit margin on these loans than under other programs, Humphries said.

Companies such as his participate because of the good public relations the programs generate and to provide a service to the community, he said.

``Service is the only thing we have to offer that makes us different from others,`` Humphries said. ``Plus, we feel that one-half percent of something is better than 100 percent of nothing.``